EXHIBIT 2.7

                     TMFE AND XGI CAPITALIZATION AGREEMENT

         This Agreement is made and entered into as of June 30, 2003 by and
between Trident Microsystems (Far East) Ltd. ("TMFE"), a Cayman Islands, B. W.
I. corporation and XGI Technology Inc. ("XGI"), a Republic of China (the
"ROC")company.

         WHEREAS, TMFE, Wealthy One Management Limited (WOM) and System
Integrated Systems Corp. ("SIS") have agreed to incorporate XGI and transfer
certain assets, including but not limited to cash or other properties agreed
upon by the respective parties, to XGI as part of an integrated plan to commence
the XGI business.

         WHEREAS, as part of the plan to incorporate XGI, TMFE has agreed to
transfer certain assets to XGI by first transferring those assets to its new
wholly owned subsidiary, XGi Technology Inc.(Cayman) and then transferring the
stock of XGi Technology Inc. (Cayman) (the "Stock") to XGI.

         WHEREAS, .if an ROC company wishes to issue to overseas private company
shareholders in exchange for overseas property or shares of the overseas private
company, such as the Stock, such shareholders may not be entitle to certain
legal incentives and benefits under the laws and regulations of ROC.

         WHEREAS, in order to implement the plan to incorporate XGI, TMFE and
XGI have agreed to the plan set forth below, the intent of which is to cause the
transactions described below to be treated as a transfer of the Stock by TMFE to
XGI in exchange for XGI stock for United States income tax purposes, pursuant to
which TMFE will be a member of a controlling group for purpose of Section 351 of
the Internal Revenue Code.

         NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements, representations, warranties, conditions and covenants contained
herein, the parties hereto, intending to be legally bound, agree as follows:

         1.   The plan set forth below is necessary to achieve the business
              objectives of the parties and for the purpose that if an ROC
              company wishes to issue to overseas private company shareholders
              in exchange for overseas property or shares of the overseas
              private company, such shareholders may not be entitle to certain
              legal incentives and benefits under the laws and regulations of
              ROC.

         2.   The parties agree to the following plan of capitalization:

              Step 1 - TMFE agrees to sell and XGI agrees to purchase the Stock
              from TMFE for cash of NT 450 million.

              Step 2 - TMFE agrees to immediately contribute all of the cash
              received pursuant to Step 1 to XGI as a capital contribution in
              exchange for 45,000,000 shares of XGI. The parties agree (i) that
              the cash referenced in Step 1 and Step 2 shall be transferred by
              bank wire, and (ii) that the bank shall be instructed to wire the
              funds to TMFE and then immediately wire the funds back to XGI for
              the subscription of XGI shares. TMFE agrees that it shall have no
              beneficial use of such funds.

         3.   After the Steps are executed, TMFE will own 45,000,000 shares of
              XGI and XGI will own the Stock.



         4.   The parties agree to execute this plan expeditiously and in good
              faith.

XGI Technology Inc.            Trident Microsystems (Far East) Ltd.,
an ROC Corporation             a Cayman Islands, B. W. I. corporation

By: /s/ Chris Lin              By: /s/ Frank Lin
   -----------------------        -----------------------
Name: Chris Lin                Name: Frank Lin

Title: President               Title: President and Chief Executive Officer